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31 Jul 2014 03:14pm

Deal activity booms across sectors in Q2

Deal activity in the food and beverage, and power and utilities sectors is rapidly increasing, according to reports by Grant Thornton and Big Four firm EY

Research by accountancy firm Grant Thornton illustrated a 109% increase in UK food and beverage deal activity when compared to Q1, representing a 16% increase on the same period last year.

Soft drinks and wholesale were reported as the most active sub-sectors in the quarter, with each accounting for 17% of total deal volume in the food and beverage sector.

Trefor Griffith, a partner at Grant Thornton and the firm’s head of food and beverage said that the food and drink sector was driven by the increasingly upbeat UK economy.

Griffith said, “Continuing appetite is apparent among both potential acquirors and vendors in the food and beverage sector which is being driven by a more upbeat UK economy.

“Valuation multiples are rising, with the increase being driven partly by buoyant equity markets and by the availability of debt on borrower-friendly terms.”

A similar report by Big Four firm EY found that global power and utility deal activity rose to $58.1bn (£34.4bn) in Q2 of 2014, with a recorded 12 “megadeals” each exceeding $1bn (£592m).

Matt Rennie, EY’s global transactions power and utilities leader, said the increase in deals was down to investors seeking growth through mergers and acquisitions due to shrinking revenues and unstable prices.

Rennie said, “With the volatility of gas prices and increased energy efficiency shrinking utilities’ revenues, investors are now turning to mergers and acquisitions (M&As) to drive growth and achieve financial and operation efficiencies.

“The surge in deal activity in Q2 is likely to continue over the next six months with US cross-state mergers and Middle East privatizations driving values up, and volumes should be boosted by asset-level renewable transactions in Europe and generation asset sales in the US and Asia-Pacific.”

Other factors pushing M&As include a steady stream of EU governments pushing for privatisation within the power and utilities industries.

However, despite the increases in these sectors, overall UK deal activity in Q2 2014 has decreased by 24% when compared with Q1; compared with the same period in 2013, though, deal volume increased by 5%.

“Acquisitions offer opportunities to focus on new product development and further global footprint provided by a well-established brand,” Griffith said.

“Such purchases can open up access into new product categories and increase global presence in areas a business is already familiar with.”

Oliver Griffin

 

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